PNR v.

IAC
GR No. 70547; January 22, 1993

TOPIC: Suits Against Government Agencies

FACTS: The passenger express train of Philippine National Railways (PNR) and a passenger bus of
Baliwag Transit Inc. collided at the railroad crossing at Barrio Balungao, Calumpit Bulacan at 1:30 in the
afternoon of August 10, 1947causing damage to the bus and its passengers, 18 of whom died and 53 suffered
physical injuries. Plaintiff alleges that the collision was due to the negligence and imprudence of
PNR and its engineer Honorio Cirbado in operating in a busy intersection without any bars,
semaphores, signal lights, flagman or switchman.

At the pre-trial conference held on June 23, 1976, the parties agreed on a partial stipulation of facts and issues
which as amplified at the continuation of the pre-trial conference, on July 12, 1976, are as follows:

1 That plaintiff is a duly constituted corporation registered with the Securities and Exchange
Commission engaged in the business of transportation and operating public utility buses for
the public with lines covering Manila, Caloocan City, Quezon City, Malabon, Rizal, Bulacan,
Pampanga and Nueva Ecija, and particularly from Manila to Hagonoy, Bulacan and return in
the month of August, l974 passing thru the town of Calumpit Bulacan, temporarily while the
bridge at Hagonoy, Bulacan was under construction;

2 That defendant Philippine National Railways is a purely government owned and controlled
corporation duly registered and existing virtue of Presidential Decree No. 741, with capacity
to sue and be sued, and is likewise engaged in transporting passengers and cargoes by trains
and buses and that, it operates a train line between San Fernando, La Union and Manila
particularly Passenger Express Train with Body No. 73, passing along the intersection of
Barrio Balungao, Calumpit, Bulacan, in going to San Fernando, La Union from Manila and
return;

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ISSUES:
1) Who between the petitioner and respondent was negligent?
2) Is PNR immune from suit?

HELD: There is no admissible evidence to show that the bus driver did not take necessary precaution in
traversing the track. Contributory negligence may not be ascribed to the bus driver for he had taken
necessary precautions before passing over the railway track. The failure of PNR, on the other hand, to
put a cross bar, or signal light, flagman, or switchman or semaphores is evidence of negligence on their
part.

By the doctrine of implied powers, the power to sue and be sued is implicit from the faculty to
transact private business. PNR is not exercising governmental powers; as such it is not immune from suit.

On the aspect of whether the Philippine National Railways enjoys immunity from suit, respondent court
initially noted that an exculpation of this nature that was raised for the first time on appeal may no longer be
entertained in view of the proscription under Section 2, Rule 9 of the Revised Rules of Court, apart from the
fact that the lawyer of petitioner agreed to stipulate inter alia that the railroad company had capacity to sue
and be sued. This being so, respondent court continued, PNR was perforce estopped from disavowing the
prejudicial repercussion of an admission in judicio. Even as the laws governing the creation and rehabilitation
of the PNR were entirely mute on its power to sue and be sued, respondent court nonetheless opined that
such prerogative was implied from the general power to transact business pertinent or indispensable to the
attainment of the goals of the railroad company under Section 4 of Republic Act No. 4156 as amended by
Republic Act No. 6366:

Sec. 4 General Powers — The Philippine National Railways shall have the following general
powers:

(a) To do all such other things and to transact all such business directly or indirectly
necessary, incidental or conducive to the attainment of the purpose of the corporation; and

(b) Generally, to exercise all powers of a railroad corporation under the Corporation law.

in conjunction with Section 2(b) of Presidential Decree No. 741:

(b) To own or operate railroad transways, bus lines, trucklines, subways, and other kinds of
land transportation, vessels, and pipelines, for the purpose of transporting for consideration,
passengers, mail and property between any points in the Philippines;

Thus, respondent court utilized the doctrine of implied powers announced in National Airports Corporation
vs. Teodoro, Sr. and Philippine Airlines, Inc. (91 Phil. 203 [1952]), to the effect that the power to sue and be
sued is implicit from the faculty to transact private business. At any rate, respondent court characterized the
railroad company as a private entity created not to discharge a governmental function but, among other
things, to operate a transport service which is essentially a business concern, and thus barred from invoking
immunity from suit.

When the State participates in a covenant, it is deemed to have descended from its superior position to the
level of an ordinary citizen and thus virtually opens itself to judicial process (only to those contracts
concluded in a proprietary capacity and therefore immunity will attach for those contracts entered into in a
governmental capacity, following the ruling in the 1985 case of United States of America vs. Ruiz (136 SCRA
487 [1985]; cited by Cruz, supra at pages 36-37)).

To the pivotal issue of whether the State acted in a sovereign capacity when it organized the PNR for the
purpose of engaging in transportation

. . . . in the instant case the State divested itself of its sovereign capacity when it organized the
PNR which is no different from its predecessor, the Manila Railroad Company. The PNR did not
become immune from suit. It did not remove itself from the operation of Articles 1732 to 1766
of the Civil Code on common carriers.

The correct rule is that "not all government entities, whether corporate or noncorporate, are
immune from suits. Immunity from suit is determined by the character of the objects for which
the entity was organized." (Nat. Airports Corp. vs. Teodoro and Phil. Airlines, Inc., 91 Phil. 203,
206; Santos vs. Santos, 92 Phil. 281, 285; Harry Lyons, Inc. vs. USA, 104 Phil. 593).

Suits against State agencies with respect to matters in which they have assumed to act in a
private or nongovernmental capacity are not suits against the State (81 C.J.S. 1319).